CONCORD, MA - WASHINGTON, DC 47 Junction Square Drive Concord, MA 01742 978-369-5533 www.mjbradley.com M.J. Bradley & Associates, LLC | Strategic Environmental Consulting Page | 1 State Fact Sheet January 2018 What Would Cap-and-Invest Mean for Oregon? Oregon lawmakers are considering adopting an economy-wide, cap-and-invest program to meet the state’s long- term greenhouse gas (GHG) reduction goals. On January 8, 2018, the Oregon House and Senate released cap- and-invest bills 1 that are expected to be taken up for a vote during the state’s short legislative session. These bills are broadly based on Senate Bill 1070 2 , introduced in 2017, which set a framework for reducing emissions in the state, while mitigating potential cost impacts and driving investment in clean energy projects. Oregon is one of a dozen or so states and Canadian provinces taking steps to limit GHG emissions to address the threat of climate change. States in the Northeast have been working to strengthen the existing Regional Greenhouse Gas Initiative (RGGI) trading program through 2030. Virginia has proposed a trading program that would link with the RGGI market. New Jersey is expected to rejoin RGGI after Governor Chris Christie pulled the state out of the program in 2011. And, Ontario joined California and Quebec in the Western Climate Initiative (WCI) carbon market in 2018 after launching its own program in 2017. This fact sheet explores what a cap-and-invest program could mean for Oregon based on analysis of SB 1070 and the draft House and Senate bills released by Senator Michael Dembrow and Representative Ken Helm (“2018 draft bills”). Overview of a Cap-and-Invest Program for Oregon In the 2018 legislative session, which runs from February 5 to March 9, 2018, the Oregon state legislature is expected to take up proposals for a market-based emission trading program (or “cap-and-invest” program). A cap-and-invest approach would establish a declining cap on GHG emissions within the state, likely including emissions from electricity production, natural gas use, transportation fuel use, and large industrial sources of emissions. SB 1070 had proposed a long-term goal of reducing emissions at least 80 percent below 1990 levels by 2050, 3 and the 2018 draft bills includes the same targets. 4 Owners of covered facilities, such as power plants and natural gas companies, would be required to surrender an emissions “allowance” or offset credit for every ton of pollution they emit. i By establishing a market for allowances, this creates an incentive for companies to implement the most cost-effective compliance solutions. This market-based approach has been widely used in regulating air pollution emissions at both the state and federal level. In addition, the 2018 draft bills would both auction a portion of the allowances each year with the proceeds used to benefit consumers and encourage investments in low-carbon technologies. In adopting a cap-and-invest approach, Oregon could potentially participate in a broader regional trading market—the Western Climate Initiative (WCI)—with California, Quebec, and Ontario. In fact, the 2018 draft i Offsets represent real and verifiable emissions reductions achieved from sectors not covered under the cap. Emitters can obtain offsets and credit them toward their emissions allowance.
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The following discussion provides a detailed summary of the key implementation details for the 2018 draft bills,
including reduction targets; sector coverage; allowance distribution method; and guidelines on the distribution of
allowance auction proceeds.
1. Reduction Targets in Oregon Cap-and-Invest Proposals
Oregon’s cap-and-invest proposals would repeal existing, non-binding state reduction targets set by the legislature
in 2007v and replace them with more ambitious targets. These original targets aimed to peak emissions in 2010,
cut emissions by 10 percent below 1990 levels by 2020, and reach 75 percent below 1990 levels by 2050.26 The
proposed new targets aim to reduce state emissions 20 percent below 1990 levels by 2025, 45 percent by 2035,
and at least 80 percent by 2050 (Figure a).
Figure a: Historic and Future Greenhouse Gas Emissions Consistent with Statewide Targets
Source: Historic Data from Oregon DEQ Greenhouse Gas Inventory (preliminary 2014 and 2015 data).
2. Major Sources of Emissions Covered Under the Cap-and-Invest Program
Oregon’s cap-and-invest program would cover approximately 83 percent of GHG emissions in the state and apply
to sources that emit at least 25,000 metric tons of carbon dioxide equivalents (CO2e) per year. Figure b illustrates
the expected covered entities. The program would likely cover nearly all emissions from electricity generation,
petroleum and natural gas supply, and 90 percent of emissions from large-scale industrial processes (cement,
ammonia, pulp and paper, and glass production).27 The cap would also cover emissions from large waste facilities,
such as landfills, and large industrial facilities that emit high global warming potential gases. Emissions stemming
from the agricultural and forestry sectors, and from small facilities in the industrial, natural gas, and waste sectors
would be exempt from the cap.vi In addition, the program provides flexibility by allowing for a portion an entity’s
compliance obligation to be met with offsets. While the commission will ultimately develop guidance for the
treatment of offsets, the 2018 draft bills propose to encourage in-state offset opportunities and should consider
v Oregon met its 2010 goal—its emissions peaked in 1999—but is not on track to meet the current 2020 and 2050 goals, and has seen
increases in transportation emissions since 2014. vi Small scale industrial, natural gas and waste facilities are defined here as facilities that emit less than 25,000 metric tons of carbon
dioxide equivalents per year. Waste facilities include waste water and waste incineration.
https://olis.leg.state.or.us/liz/2017R1/Downloads/MeasureDocument/SB1070/Introduced. 4 Oregon State Legislature Clean Energy Jobs Work Group, “Clean Energy Jobs Program Overview,” (December 20, 2017),
https://www.oregonlegislature.gov/helm/workgroup_materials/4%20PROGRAM%20OVERVIEW%20(final)%2012%2020%2017.pdf. 5 Energy and Environmental Economics, "Memorandum on Macroeconomic Modeling," prepared for Oregon Department of
Environmental Quality (February 2017), http://www.oregon.gov/deq/FilterDocs/app3memo.pdf. 6 Liu, Jenny H, et al., “Economic and Emissions Impacts of a Clean Air Tax or Fee in Oregon (SB306),” Portland State University
Northwest Economic Research Center (2014), https://oregonlegislature.gov/Iro/Documents/RR%204-
14%20SB%20306%20Clean%20Air.pdf.
Northwest Economic Research Center, “Carbon Tax and Shift: How to make it work for Oregon’s economy,” Portland State University
(March 1, 2013), https://www.pdx.edu/nerc/sites/www.pdx.edu.nerc/files/carbontax2013.pdf. 7 Oregon Global Warming Commission, “Biennial Report to the Legislature 2015,” Keep Oregon Cool (2015),
http://www.keeporegoncool.org/sites/default/files/ogwc-standard-documents/OGWC_Rpt_Leg_2015_final.pdf. 8 U.S. Energy Information Administration, “Monthly Energy Review November 2017,” accessed November 2017,
https://www.eia.gov/totalenergy/data/monthly/. 9 Pollin, Robert, Heidi Garrett-Peltier, James Heintz and Bracken Hendricks, "Green Growth: A U.S. Program for Controlling Climate
Change and Expanding Job Opportunities," Univeristy of Massachusetts Amberst Polictical Economy Research Institute, and the Center for
American Progress (September 2014), online at: http://www.peri.umass.edu/fileadmin/pdf/Green_Growth_2014/GreenGrowthReport-
PERI-Sept2014.pdf;
Pollin, Robert et al., “The Economic Benefits of Investing in Clean Energy,” University of Massachusetts Amherst Political Economy
Research Institute and The Center for American Progress (2009), https://cdn.americanprogress.org/wp-
content/uploads/issues/2009/06/pdf/peri_report.pdf. 10 Department of Energy, “U.S. Energy and Employment Report: January 2017,” (2017),
https://energy.gov/sites/prod/files/2017/01/f34/2017%20US%20Energy%20and%20Jobs%20Report_0.pdf. 11 Pollin, Robert, Heidi Garrett-Peltier, James Heintz and Bracken Hendricks, "Green Growth: A U.S. Program for Controlling Climate
Change and Expanding Job Opportunities," Univeristy of Massachusetts Amberst Polictical Economy Research Institute, and the Center for
American Progress (September 2014), online at: http://www.peri.umass.edu/fileadmin/pdf/Green_Growth_2014/GreenGrowthReport-
PERI-Sept2014.pdf;
Pollin et al., “The Economic Benefits of Investing in Clean Energy. 12 Oregon Climate Change Research Institute, The Third Oregon Climate Assessment Report, January 2017,
http://www.occri.net/media/1042/ocar3_final_125_web.pdf. 13 The Research Group, LLC with assistance from the Coastal Oregon Marine Experiment Station, Oregon Commercial Fishing Industry in
2015, Briefing Report, Prepared for Oregon Department of Fish and Wildlife (March 2016). 14 Simmons, Eric A.; Scudder, Micah G.; Morgan, Todd A.; Berg, Erik C.; Christensen, Glenn A. 2016. Oregon’s forest products industry
and timber harvest 2013 with trends through 2014. Gen. Tech. Rep. PNW-GTR-942. Portland, OR: U.S. Department of Agriculture, Forest
Service, Pacific Northwest Research Station. 15 Oregon Climate Change Research Institute, Third Oregon Climate Assessment Report. 16 Oregon Climate Change Research Institute, Third Oregon Climate Assessment Report. 17 See also, https://olis.leg.state.or.us/liz/2017R1/Downloads/CommitteeMeetingDocument/104912. 18 Oregon State Legislature Clean Energy Jobs Work Group, “Summary of Policy Decisions on Specific Legislative Components.” 19 MJ Bradley and Associates, “A Pioneering Approach to Carbon Markets: How the Northeast States Redefined Cap and Trade for the
Benefit of Consumers,” (February 2017), http://www.mjbradley.com/sites/default/files/rggimarkets02-15-2017.pdf.
Analysis Group, “The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast and Mid-Atlantic States: Review of
the Use of RGGI Auction Proceeds from the First Three-Year Compliance Period,” (November 2011),
http://www.analysisgroup.com/uploadedfiles/content/insights/publishing/economic_impact_rggi_report.pdf. 20 California Air Resources Board (CARB), “California Climate Investments 2017 Annual Report,” (March 2017),
https://www.arb.ca.gov/cc/capandtrade/auctionproceeds/cci_annual_report_2017.pdf; Center for Climate and Energy Solutions, “Policy
Hub: California Cap and Trade,” (accessed November 2017), https://www.c2es.org/content/california-cap-and-trade/. 21 Gattaciecca, Julien et al, “Protecting the Most Vulnerable: A Financial Analysis of Cap-and-Trade’s Impact on Households in
Disadvantaged Communities Across California,” UCLA Luskin School of Public Affairs (April 2016),
http://innovation.luskin.ucla.edu/sites/default/files/FINAL%20CAP%20AND%20TRADE%20REPORT.pdf. 22 USDA, “Forest Health Highlights in Oregon – 2016,”
http://www.oregon.gov/ODF/Board/Documents/BOF/20171101/BOFATTCH_20171101_08_01.pdf 23 National Interagency Fire Center, “National Report of Wildland Fires and Acres Burned by State 2014,”
https://www.predictiveservices.nifc.gov/intelligence/2014_Statssumm/fires_acres14.pdf. 24 CARB, “ARB Offset Credit Issuance,” last updated November 22, 2017,
https://www.arb.ca.gov/cc/capandtrade/offsets/issuance/issuance.htm; CARB, “ARB Offset Credits Issued,” last updated November 22,
2017, https://www.arb.ca.gov/cc/capandtrade/offsets/issuance/arb_offset_credit_issuance_table.pdf. 25 Anderson, Christa, et al, “Forest offsets partner climate-change mitigation with conservation,” Frontiers in Ecology and the Environment
15 (7), (September 2017) http://onlinelibrary.wiley.com/doi/10.1002/fee.1515/full. 26 Oregon State Law 2015 ORS 468A.205, https://www.oregonlaws.org/ors/468A.205. 27 Energy and Environmental Economics (E3), “Appendix 3: Memorandum on Macroeconomic Modeling” for Oregon DEQ’s
“Considerations for Designing a Cap-and-Trade Program in Oregon,” http://www.oregon.gov/deq/FilterDocs/app3memo.pdf.